Flood Insurance Covers Less Than Home Insurance
If you are buying a new home or refinancing your home, you may have been told that you need flood insurance. Flood insurance is not included in typical homeowners insurance, so you will need to buy a separate policy. The coverage in a flood policy is usually far less than your primary home insurance policy.
Surprising Flood Facts
- Over 20% of flood claims come from low-risk areas.
- From 1980 to 2017 there were 28 flood events, 91 severe storms, and 38 tropical cyclones that led to flood damage.
- Most home lenders require that you purchase flood insurance when you are in a medium or high risk flood zone.
What Is and Is Not Covered by Flood Insurance
Flood insurance only covers the repairs or replacement of the primary structure by default. The insurance does not cover:
- Personal belongings (can be added)
- Portable and window air conditioners and heaters
- Portable microwaves and dishwashers
- Deep freezers and the food in them
- Currency, precious metals
- Temporary housing (Coverage D)
- Mold that could have been reasonably prevented
The National Flood Insurance Program
Flood damage can be extremely expensive. A foot of water in your home can deal $50,000 in damages. Additionally, 90% of the natural disasters proclaimed by the president involve flooding. The combination of high cost and high frequency has forced insurance companies to mostly step away from flood coverage, outside of a few private flood specialists.
The National Flood Insurance Program (NFIP) was developed within FEMA in 2004 to address the gap in risk capital as insurance companies were no longer offering flood coverage. You can purchase flood insurance through an insurance agent that works with the NFIP. Your lender may require you to include your flood insurance premium with your mortgage payment. In this instance, the annul premium is paid up front and the total bill gets split across your monthly mortgage payments.
Flood insurance is complicated, and the coverages often aren't as comprehensive as your standard homeowners policy. Even if you don’t live in a floodplain, I still recommend most homeowners should carry flood insurance as 20% of flood claims come from low risk flood zones.
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